The Ministry for Housing, Communities and Local Government’s (MHCLG) Select Committee called the head of the National Audit Office (NAO) in to give evidence this week as it continues to react to the trend of councils investing in commercial property. Whereas this is not unwelcome, the NAO’s remit does not extend to the activities of the councils themselves, but rather the audit, oversight and scrutiny that MHCLG provides to the councils.
The problem is that this risks not delivering much in the way of progress and, in fact, I would argue that most councils we work with are well ahead of the curve in terms of management of their commercial activities. They are reacting positively to the pressures of austerity and are balancing that with increasing levels of scrutiny, governance and resourcing up in order to build and manage their property portfolios, in a manner reflective of their risk aversion. That is not to say that all are perfect, and of course there are some infamous big spenders that dominate the headlines, but there is some really positive work going on at local level.
The councils we deal with are engaged with the market, are taking long term (not just transactional) advice, recognise the difference between the performance metrics for different opportunities, are subject to scrutiny at the highest level of local authority governance structures, and adopt and adapt to guidance from advisors, the Local Government Association and CIPFA (the Chartered Institute for Public Finance & Accountancy).
I would venture the opinion that MHCLG has turned to the NAO as a reaction to headlines and to show some action. But to make the investigation and report worthwhile, the Ministry should look first to local government, speak to them, find out what they’re doing, why they’re doing it, and how they are approaching prudency and good governance. There are pleasant surprises behind the cloudy headlines.
Sir Amyas Morse, outgoing auditor general of the NAO, said in evidence to the MHCLG Select Committee this week that: "Councils are entitled to do [commercial investments] but have they got the right skill sets on board, the experience, have they got portfolio management skills and things of that sort. “That is the sort of thing we are urging auditors [at MHCLG] to look at so they can understand the level of risk involved.”